The effect of financial inclusion on poverty rate in Sumatra Island

https://doi.org/10.35912/gabs.v2i1.3585
Published: Oct 21, 2025

Abstract:

Purpose: This study examines the effects of financial inclusion and inflation on poverty reduction across ten provinces on the island of Sumatra, Indonesia, from 2017 to 2023. Despite Indonesia’s significant economic progress in recent decades, poverty and inequality remain persistent challenges, particularly in Sumatra, where disparities in access to resources and opportunities continue to exist.

Research Methodology: A quantitative approach was employed using panel data from ten provinces in Sumatra. Regression analysis was conducted to evaluate the relationship between the Financial Inclusion Index (IKK), inflation, and poverty rate.

Results: The findings reveal that the Financial Inclusion Index (IKK) has a significant negative effect on poverty, indicating that increased access to financial services helps reduce poverty levels. Inflation also shows a significant negative effect, suggesting that controlled inflation within a stable range may strengthen household purchasing power and mitigate poverty.

Conclusions: Enhanced financial inclusion effectively reduces poverty by facilitating access to credit, savings, and other financial services that empower local communities. Stable inflation management contributes to a predictable economic environment conducive to poverty alleviation.

Limitations: This study is limited to Sumatra and excludes other socioeconomic factors such as education, employment, and government assistance programs that may influence poverty levels.

Contribution: The study provides empirical evidence of the regional effects of financial inclusion and inflation on poverty, emphasizing the importance of localized economic policy and consistent monitoring to achieve inclusive and sustainable growth.

Keywords:
1. Economy
2. Financial Inclusion Index
3. Inflation
4. Poverty
5. Panel Data
Authors:
1 . Imron Rosyadi
University of Lampung, Indonesia
2 . Toto Gunarto
University of Lampung, Indonesia
3 . Deddy Yuliawan
University of Lampung, Indonesia
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How to Cite
Rosyadi, I. ., Gunarto, T., & Yuliawan, D. (2025). The effect of financial inclusion on poverty rate in Sumatra Island. Global Academy of Business Studies, 2(1), 33–49. https://doi.org/10.35912/gabs.v2i1.3585
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Issue & Section
Vol. 2 No. 1 (2025): July
Articles
References

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    Amagir, A., van den Brink, H. M., Groot, W., & Wilschut, A. (2022). SaveWise: The impact of a real-life financial education program for ninth grade students in the Netherlands. Journal of Behavioral and Experimental Finance, 33, 100605.

    Ariani, K. F., Rahmawati, T. I., & Anggraini, D. V. (2024). Peningkatan Literasi Keuangan Masyarakat Pedesaan Guna Mendorong Tingkat Inklusi Keuangan Indonesia Perspektif Hukum Perbankan. Jurnal Multidisiplin Ilmu Akademik, 1(6), 118-128.

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    Endi, A. C., Fanggidae, R. E., & Ndoen, W. M. (2023). The effect of religiosity and spirituality on financial behavior district. Journal of Multidisciplinary Academic and Practice Studies, 1(1), 45-53. doi:https://doi.org/10.35912/jomaps.v1i1.1455

    Fadhillah, A., Arintoko, A., & Kamio, K. (2021). Effect Of Exports, Government Expenditure And Inflation On Indonesia Poverty (2000-2019). Media Ekonomi, 21(1), 43-51. doi:https://doi.org/10.30595/medek.v21i1.11780

    Fadlan, A., & Lubis, R. P. (2023). The influence of inflation on the poverty level in Medan City: A case study of labor and human resources. Journal of Management and Business Innovations, 5(01), 35-46.

    Firaldi, Y., Wibisono, C., Ngaliman, N., Indrayani, I., & Satriawan, B. (2023). The influence of leadership, discipline, and workload on employee performance through job satisfaction as an intervening variable in Regional Revenue Agency Riau Islands Province. Journal of Multidisciplinary Academic Business Studies, 1(1), 27-52. doi:https://doi.org/10.35912/jomabs.v1i1.1779

    Gujarati, D. N. (2006). Econometria básica: Elsevier Brasil.

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    Jeanneney, S. G., & Kpodar, K. (2011). Financial development and poverty reduction: can there be a benefit without a cost? The Journal of development studies, 47(1), 143-163. doi:https://doi.org/10.1080/00220388.2010.506918

    Koomson, I., Villano, R. A., & Hadley, D. (2020). Effect of financial inclusion on poverty and vulnerability to poverty: Evidence using a multidimensional measure of financial inclusion. Social Indicators Research, 149(2), 613-639.

    Liyana, N. F. (2023). The Effect Of Educational Inequality On Economic Growth In Indonesia. Jurnal Pajak Dan Keuangan Negara (PKN), 5(1), 144-153. doi:https://doi.org/10.31092/jpkn.v5i1.2259

    Makridakis, N. M., Ross, R. K., Pike, M. C., Crocitto, L. E., Kolonel, L. N., Pearce, C. L., . . . Reichardt, J. K. (1999). Association of mis-sense substitution in SRD5A2 gene with prostate cancer in African-American and Hispanic men in Los Angeles, USA. The Lancet, 354(9183), 975-978. doi:https://doi.org/10.1016/S0140-6736(98)11282-5

    Maurilla, A., Suriani, S., & Nasir, M. (2022). Do Poverty and Economic Growth Matter for Income Inequality Reduction in Yogyakarta Province? Jurnal Ekonomi & Studi Pembangunan, 23(2), 308-322. doi:https://doi.org/10.18196/jesp.v23i2.15859

    Mishkin, F. S. (2007). The economics of money, banking, and financial markets: Pearson education.

    Muliyanto, M., Indrayani, I., Satriawan, B., Ngaliman, N., & Catrayasa, I. W. (2023). The influence of competence, motivation, and work culture on employee performance through self-efficacy as an intervening variable for medical support employees Regional General Hospital Tanjungpinang City. Journal of Multidisciplinary Academic Business Studies, 1(1), 1-12. doi:https://doi.org/10.35912/jomabs.v1i1.1777

    Murtadlo, K., & Sulhan, M. (2023). Ekonomi Digital dan Inklusi Keuangan Terhadap Pemulihan Ekonomi Nasional. Jurnal Nusantara Aplikasi Manajemen Bisnis, 8(1), 90-104.

    Ndun, I. (2024). The absolute competence of the industrial relations court in resolving employment termination disputes. Journal of Multidisciplinary Academic Business Studies, 1(3), 195-205. doi:https://doi.org/10.35912/jomabs.v1i3.2073

    Ningrum, E. P., Sumarno, M., Nursyamsi, S. E., & Siregar, N. (2024). Faktor Terkait Kesenjangan Ekonomi dan Kesejahteraan. PRIVE: Jurnal Riset Akuntansi dan Keuangan, 7(2), 116-126.

    Ningrum, M. P., Fachrudin, F., & Ngaliman, N. (2024). The effect of service quality, utilisation of management information systems, and communication on participant satisfaction with trust as an intervening variable on Taspen pension participants in the Tanjungpinang City. Journal of Multidisciplinary Academic Business Studies, 1(3), 221-236. doi:https://doi.org/10.35912/jomabs.v1i3.2423

    Olaniyi, C. O., & Odhiambo, N. M. (2024). Inflation-poverty causal nexus in sub-Saharan African countries: an asymmetric panel causality approach. International Trade, Politics and Development, 8(1), 34-64. doi:https://doi.org/10.1108/ITPD-08-2023-0024

    Omar, M. A., & Inaba, K. (2020). Does financial inclusion reduce poverty and income inequality in developing countries? A panel data analysis. Journal of economic structures, 9(1), 37.

    Poushter, J. (2019). Financial inclusion: helping countries meet the needs of the under-banked and under-servedk (2016).

    Rahman, P. A., Firman, F., & Rusdinal, R. (2019). Kemiskinan dalam perspektif ilmu sosiologi. Jurnal Pendidikan Tambusai, 3(3), 1542-1548.

    Rahu, K. Y. d., Neolaka, M. N. B. C., & Djaha, A. S. A. (2023). Personnel management information system in order to create up-to-date and integrated personel data and information in the personnel and human resources agency in malaka regency. Journal of Multidisciplinary Academic and Practice Studies, 1(1), 55-70. doi:https://doi.org/10.35912/jomaps.v1i1.1449

    Sari, D. J., Wibisono, C., & Gaddafi, M. (2025). Determination of training, workload and work experience on performance government internal oversight apartment (APIP) Regional Inspectorate at the Province of Riau Islands with motivation as an intervening variable. Journal of Multidisciplinary Academic Business Studies, 1(2), 99-123. doi:https://doi.org/10.35912/jomabs.v1i2.3396

    Sarma, M., & Pais, J. (2011). Financial inclusion and development. Journal of international development, 23(5), 613-628.

    Seven, U., & Coskun, Y. (2016). Does financial development reduce income inequality and poverty? Evidence from emerging countries. Emerging Markets Review, 26, 34-63. doi:https://doi.org/10.1016/j.ememar.2016.02.002

    Shodrokova, X., & Asngari, I. (2024). Analysis of Housing Prices in BRICS Countries: COVID-19 Pandemic Shock. Economic Insights-Trends & Challenges, 13(4).

    Sinaga, M. H., & Purba, D. S. (2025). The Role Of Financial Inclusion And Financial Planning In Reducing Poverty Levels In Tanah Jawa District, Simalungun Regency. Jurnal Ilmiah Accusi, 7(1), 125-134. doi:https://doi.org/10.36985/dfa51s47

    Sumbogo, B., Oktaria, E. T., Barusman, M. Y. S., Defrizal, D., & Barusman, A. R. P. (2024). Efforts to reduce illegal parking in Lampung Province. Journal of Multidisciplinary Academic Business Studies, 1(4), 261-269. doi:https://doi.org/10.35912/jomabs.v1i4.2324

    Surya, A., Sagita, H., Wa, A. R., Cn, Y., Hasbullah, H., & Yulistina, Y. (2024). The influence of professionality, work culture and competence on the quality of services at the personnel and training agency of Lampung Province. Journal of Multidisciplinary Academic Business Studies, 2(1), 35-46. doi:https://doi.org/10.35912/jomabs.v2i1.2509

    Sutama, I. K. G. S., Nyoman Diah Utari, D., & Luh Riniti, R. (2023). Pengembangan Pariwisata dengan Community Based Tourism di Desa Wisata Penatih Denpasar. Jurnal Studi Perhotelan dan Pariwisata, 2(1), 1-11. doi:https://doi.org/10.35912/jspp.v2i1.2260

    Tran, H. T. T., & Le, H. T. T. (2021). The impact of financial inclusion on poverty reduction. Asian Journal of Law and Economics, 12(1), 95-119.

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  2. Akita, T., & Kataoka, M. (2022). Economic Tertialization, Output Deindustrialization, and Income Inequality in Indonesia: A Bidimensional Inequality Decomposition Analysis Regional Inequality and Development: Measurement and Applications in Indonesia (pp. 123-139): Springer.
  3. Amagir, A., van den Brink, H. M., Groot, W., & Wilschut, A. (2022). SaveWise: The impact of a real-life financial education program for ninth grade students in the Netherlands. Journal of Behavioral and Experimental Finance, 33, 100605.
  4. Ariani, K. F., Rahmawati, T. I., & Anggraini, D. V. (2024). Peningkatan Literasi Keuangan Masyarakat Pedesaan Guna Mendorong Tingkat Inklusi Keuangan Indonesia Perspektif Hukum Perbankan. Jurnal Multidisiplin Ilmu Akademik, 1(6), 118-128.
  5. Asep Deni, M., Hirbasari, I. A., Taryono, S., Iswahyudi, M. S., Heppi Syofya, S., Soeharjoto, S., & Humaidah Muafiqie, S. (2024). PENGANTAR EKONOMI PEMBANGUNAN: CV Rey Media Grafika.
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  12. Fadhillah, A., Arintoko, A., & Kamio, K. (2021). Effect Of Exports, Government Expenditure And Inflation On Indonesia Poverty (2000-2019). Media Ekonomi, 21(1), 43-51. doi:https://doi.org/10.30595/medek.v21i1.11780
  13. Fadlan, A., & Lubis, R. P. (2023). The influence of inflation on the poverty level in Medan City: A case study of labor and human resources. Journal of Management and Business Innovations, 5(01), 35-46.
  14. Firaldi, Y., Wibisono, C., Ngaliman, N., Indrayani, I., & Satriawan, B. (2023). The influence of leadership, discipline, and workload on employee performance through job satisfaction as an intervening variable in Regional Revenue Agency Riau Islands Province. Journal of Multidisciplinary Academic Business Studies, 1(1), 27-52. doi:https://doi.org/10.35912/jomabs.v1i1.1779
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  21. Iyer, P. P. (2024). Impact of Inflation on Poverty: A case of BRIC Economies.
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  23. Koomson, I., Villano, R. A., & Hadley, D. (2020). Effect of financial inclusion on poverty and vulnerability to poverty: Evidence using a multidimensional measure of financial inclusion. Social Indicators Research, 149(2), 613-639.
  24. Liyana, N. F. (2023). The Effect Of Educational Inequality On Economic Growth In Indonesia. Jurnal Pajak Dan Keuangan Negara (PKN), 5(1), 144-153. doi:https://doi.org/10.31092/jpkn.v5i1.2259
  25. Makridakis, N. M., Ross, R. K., Pike, M. C., Crocitto, L. E., Kolonel, L. N., Pearce, C. L., . . . Reichardt, J. K. (1999). Association of mis-sense substitution in SRD5A2 gene with prostate cancer in African-American and Hispanic men in Los Angeles, USA. The Lancet, 354(9183), 975-978. doi:https://doi.org/10.1016/S0140-6736(98)11282-5
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  27. Mishkin, F. S. (2007). The economics of money, banking, and financial markets: Pearson education.
  28. Muliyanto, M., Indrayani, I., Satriawan, B., Ngaliman, N., & Catrayasa, I. W. (2023). The influence of competence, motivation, and work culture on employee performance through self-efficacy as an intervening variable for medical support employees Regional General Hospital Tanjungpinang City. Journal of Multidisciplinary Academic Business Studies, 1(1), 1-12. doi:https://doi.org/10.35912/jomabs.v1i1.1777
  29. Murtadlo, K., & Sulhan, M. (2023). Ekonomi Digital dan Inklusi Keuangan Terhadap Pemulihan Ekonomi Nasional. Jurnal Nusantara Aplikasi Manajemen Bisnis, 8(1), 90-104.
  30. Ndun, I. (2024). The absolute competence of the industrial relations court in resolving employment termination disputes. Journal of Multidisciplinary Academic Business Studies, 1(3), 195-205. doi:https://doi.org/10.35912/jomabs.v1i3.2073
  31. Ningrum, E. P., Sumarno, M., Nursyamsi, S. E., & Siregar, N. (2024). Faktor Terkait Kesenjangan Ekonomi dan Kesejahteraan. PRIVE: Jurnal Riset Akuntansi dan Keuangan, 7(2), 116-126.
  32. Ningrum, M. P., Fachrudin, F., & Ngaliman, N. (2024). The effect of service quality, utilisation of management information systems, and communication on participant satisfaction with trust as an intervening variable on Taspen pension participants in the Tanjungpinang City. Journal of Multidisciplinary Academic Business Studies, 1(3), 221-236. doi:https://doi.org/10.35912/jomabs.v1i3.2423
  33. Olaniyi, C. O., & Odhiambo, N. M. (2024). Inflation-poverty causal nexus in sub-Saharan African countries: an asymmetric panel causality approach. International Trade, Politics and Development, 8(1), 34-64. doi:https://doi.org/10.1108/ITPD-08-2023-0024
  34. Omar, M. A., & Inaba, K. (2020). Does financial inclusion reduce poverty and income inequality in developing countries? A panel data analysis. Journal of economic structures, 9(1), 37.
  35. Poushter, J. (2019). Financial inclusion: helping countries meet the needs of the under-banked and under-servedk (2016).
  36. Rahman, P. A., Firman, F., & Rusdinal, R. (2019). Kemiskinan dalam perspektif ilmu sosiologi. Jurnal Pendidikan Tambusai, 3(3), 1542-1548.
  37. Rahu, K. Y. d., Neolaka, M. N. B. C., & Djaha, A. S. A. (2023). Personnel management information system in order to create up-to-date and integrated personel data and information in the personnel and human resources agency in malaka regency. Journal of Multidisciplinary Academic and Practice Studies, 1(1), 55-70. doi:https://doi.org/10.35912/jomaps.v1i1.1449
  38. Sari, D. J., Wibisono, C., & Gaddafi, M. (2025). Determination of training, workload and work experience on performance government internal oversight apartment (APIP) Regional Inspectorate at the Province of Riau Islands with motivation as an intervening variable. Journal of Multidisciplinary Academic Business Studies, 1(2), 99-123. doi:https://doi.org/10.35912/jomabs.v1i2.3396
  39. Sarma, M., & Pais, J. (2011). Financial inclusion and development. Journal of international development, 23(5), 613-628.
  40. Seven, U., & Coskun, Y. (2016). Does financial development reduce income inequality and poverty? Evidence from emerging countries. Emerging Markets Review, 26, 34-63. doi:https://doi.org/10.1016/j.ememar.2016.02.002
  41. Shodrokova, X., & Asngari, I. (2024). Analysis of Housing Prices in BRICS Countries: COVID-19 Pandemic Shock. Economic Insights-Trends & Challenges, 13(4).
  42. Sinaga, M. H., & Purba, D. S. (2025). The Role Of Financial Inclusion And Financial Planning In Reducing Poverty Levels In Tanah Jawa District, Simalungun Regency. Jurnal Ilmiah Accusi, 7(1), 125-134. doi:https://doi.org/10.36985/dfa51s47
  43. Sumbogo, B., Oktaria, E. T., Barusman, M. Y. S., Defrizal, D., & Barusman, A. R. P. (2024). Efforts to reduce illegal parking in Lampung Province. Journal of Multidisciplinary Academic Business Studies, 1(4), 261-269. doi:https://doi.org/10.35912/jomabs.v1i4.2324
  44. Surya, A., Sagita, H., Wa, A. R., Cn, Y., Hasbullah, H., & Yulistina, Y. (2024). The influence of professionality, work culture and competence on the quality of services at the personnel and training agency of Lampung Province. Journal of Multidisciplinary Academic Business Studies, 2(1), 35-46. doi:https://doi.org/10.35912/jomabs.v2i1.2509
  45. Sutama, I. K. G. S., Nyoman Diah Utari, D., & Luh Riniti, R. (2023). Pengembangan Pariwisata dengan Community Based Tourism di Desa Wisata Penatih Denpasar. Jurnal Studi Perhotelan dan Pariwisata, 2(1), 1-11. doi:https://doi.org/10.35912/jspp.v2i1.2260
  46. Tran, H. T. T., & Le, H. T. T. (2021). The impact of financial inclusion on poverty reduction. Asian Journal of Law and Economics, 12(1), 95-119.